State Divestment in Higher Education Has Lead to an Explosion of Student-Loan Debt

By Betsy Prueter

The Center for American Progress (CAP) released a new report this month that looks at the increasing reliance of public college students on student loans and the impact of the recession on state cuts to higher education funding. It builds on another recent CAP paper, which showed that in response to the 2007 fiscal crisis, most states reduced support to public colleges and universities which in turn, pushed those institutions to increase tuition for students and families. This report examines the relationship between state divestment and student loan borrowing and finds, among other things, that low and middle income families from states that decreased funding paid a greater net price for college than students in the same income group in other states.

Among the report’s other findings: – Between 2008-2012, over half (29/50) of state governments decreased their total amount of funding to public institutions. – When measured on a “per-student” basis, nearly all states (44/50) decreased their support to public institutions between 2008 and 2012. – These decreases coincide with a 13.7% increase in enrollment at public colleges and universities and an increase in the amount of tuition-driven revenue in 47 states. – Due in part to increased tuition in nearly all states, students and their families have taken out record amounts of loans, a figure well discussed in the media in the last couple of years. – The percentage of students borrowing at four-year public institutions increased to 30% during the 2011-12 school year, up 6% from 2007-2008. The amount of money borrowed has also increased by over $2,000 per student, per year from 2003-2004 to 2011-2012. – 37 states saw an increase in borrowing by at least $1,000 per student, per year with the greatest increase in Oregon ($2,274 per student, per year). – The report argues that a closer look at annual borrowing on a per-student basis in each state can help determine if state cuts were, in fact, linked to increases in student loans. – The report found that states that divested the most (by 30% or more) saw the greatest increase in federal student-loan borrowing (in terms of number of borrowers AND the overall, per year amount borrowed). – At each level of disinvestment, student loan borrowing increased in line with the change in state support for public colleges (see figure below).

pnpi-disinvest

  • In addition to the correlation between state disinvestment and student loan borrowing, the report found a targeted impact on low and middle income families.
    • Low and middle income families from states that decreased funding paid a greater net price for college than students in the same income group in other states.